Lynn: Difficult choices coming from looming fiscal slowdown

Published 12:01 am, Thursday, June 23, 2011

A fiscal crisis that's putting the squeeze on defense budgets and related industries requires difficult choices for leaders and a responsible approach that manages the spending slowdown while retaining military effectiveness, Deputy Defense Secretary William J. Lynn III said.

In a keynote speech at an Aerospace Industry Association dinner June 19, Lynn said he'd received a letter from a 9-year-old boy named Hunter, who enclosed a drawing of a futuristic bomber he had designed.

“Hunter's letter highlights the issues confronting us,” Lynn said. “Our future security is inextricability tied to the technology we produce, but we are entering a period of significant resource constraints.

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"For the past decade, we have lived in a world where when we faced new security challenges, we could meet them with increased resources," Lynn said. "We have lived in a world where when we wanted to build systems with new technology, like Hunter's bomber, we could increase our budget.

“Going forward, we will not have that luxury. We are going to have to make hard choices.”

The central challenge in defense planning, the deputy secretary said, is how to manage a slowdown in spending responsibly in the midst of two active conflicts, other commitments and numerous threats.

He noted that the United States and almost all of its European allies are experiencing a significant fiscal crisis that requires everything to be on the table — including revenues, entitlements, domestic discretionary spending and defense spending – in regaining solid financial footing.

“Managing our militaries under these circumstances will challenge defense policymakers and industry executives alike,” he said. “We have at present the most capable, professional fighting force the world has ever known.

“Our challenge is to accommodate our changing fiscal circumstances without undercutting our military effectiveness, now or in the future.”

History is instructive in showing the way, Lynn said, noting that this is the fifth inflection in U.S. defense spending since the end of World War II. The first three, he explained, came after that war and after conflicts in Korea and Vietnam.

“Then in the mid-1980s, we faced a situation somewhat analogous to today,” he added. “Deficits during the Reagan administration led Congress to impose spending caps. The end of the Cold War then accelerated defense reductions.”

In all of those transitions in defense spending, Lynn said, the U.S. military suffered a disproportionate loss of capability as a result. “Each time, we had to rebuild much of the capability we lost, often at great expense and under urgent circumstances. In other words, we have gone 0-for-4 in managing the drawdowns to date.”

Four broad lessons can be drawn from prior drawdowns, the deputy secretary said:

“The first is to make hard decisions early,” he told the group. Things are not going to get better. In a drawdown, there will be less money than we anticipate in the future, not more. He noted that even well-managed programs experience some cost growth.

“The bottom line is that if we cannot afford it now, we will certainly not be able to afford it in the future,” he said. “To live within our expected resource levels, we need to make the hard decisions now.

“Every dollar we spend on systems and programs we ultimately do not need or cannot afford is a dollar we cannot spend on the systems we must have. The equation is that simple.”

And although the U.S. Defense Department is aggressively pursuing efficiencies to make the most of limited defense budgets going forward, Lynn said, the second lesson from prior drawdowns is that it is impossible to generate the needed savings through efficiencies alone.

“By pure efficiencies, I mean where you perform the same function for less money,” he explained. “For instance, cloud computing holds out the potential of generating greater capability at lower cost across our information technology enterprise. But we are not going to find enough pure productivity gains to generate all the required savings. This means that we have to prioritize. We will have to eliminate programs thatare not valuable enough to sustain in this budget environment.”